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Innovation In Action

For Merck

Standardization of connectivity transforms global cash management

The Background
Merck & Co is a global research-driven pharmaceutical company with an annual turnover of over USD24 billion.

The Challenge
Merck's planned implementation of a single global ERP system and migration of payables and collections to Shared Service Centers prompted a decision to radically streamline bank relationships and re-engineer its cash flow management processes. Realizing that the cost of upgrading 100+ existing bank interfaces would run into USD millions, the firm resolved to use the latest technologies and standards to establish universal cash processes across its 73 countries worldwide.

The Solution
In Q2 2007, Merck selected Citi as one of two banks to build its single cash flow infrastructure, based on Citi's commitment to the firm's timetable and grasp of the operational and technical requirements. A key principle of the project was to avoid any customization of technology, message standards or bank interfaces. This required the implementation of a single communication channel (SWIFTNet SCORE), a single flexible file format standard (XML ISO 20022), and the ability to send payment instructions agnostic of local payment instruments and clearing arrangements. Under the new solution, Merck generates standard "overpopulated" payment instructions from which Citi takes the information it needs to format and route the payment. This instrument neutrality avoids any internal programming changes when new SEPA instruments are introduced, for example, or during the migration to Merck's single ERP and two Shared Service Centers.

To support payment security without increasing administrative burdens, Merck intends to use Citi® Managed Identity Services as a single secure means of opening and controlling bank accounts, defining signatories and authorizing payments. "Particularly when we're migrating processes from multiple to a single ERP system, control over authorizations is critical," said Ian Johnson, International Treasurer, Merck Sharp & Dohme Finance Europe.

The Result
Merck's unified, standardized banking platform will provide the firm with a single view of cash and as such will enable greater control over global cash balances, resulting in improved liquidity management and forecasting.